Knew Nothing of Funds Diversion, Regan Says : Testimony From Chief of Staff, Shultz Convinces Sen. Durenberger of North’s Sole Responsibility

White House Chief of Staff Donald T. Regan, testifying under oath in a closed hearing of the Senate Intelligence Committee, insisted Tuesday that neither he nor President Reagan knew or approved of the diversion of profits from Iranian arms sales to the Nicaraguan rebels, and he publicly emphasized afterward: “I did nothing wrong.”

Following testimony by Regan and Secretary of State George P. Shultz, committee Chairman Dave Durenberger (R-Minn.) said he was convinced that Marine Lt. Col. Oliver L. North, a dismissed member of the White House National Security Council staff, was solely responsible for the diversion of arms sale profits to the contras.

‘Without Authority’

“It’s clear after today that whoever pulled it off did it without proper, appropriate authority,” Durenberger said. “And that person is Ollie North. . . . Ollie North acted without proper authorization. . . . At every lever of this operation was Ollie North’s hand.”

In particular, Durenberger said he was convinced that President Reagan was unaware of the diversion of funds to the contras until an internal Administration investigation revealed it late last month.

Although Durenberger did not challenge Regan’s testimony, the chief of staff’s highly unusual, nearly five-hour appearance before the committee apparently did not convince all the members of his innocence. Although the panel has no evidence to contradict the testimony, Sen. Dennis DeConcini (D-Ariz.) said he could not believe the White House aide’s disclaimers.

“He tells an unbelievable story in a very believable way,” DeConcini said. “I have trouble believing that the chief of staff would not have greater knowledge than even the President. . . . It’s difficult for me to believe that someone in that position did not have some knowledge.”

Nor did Regan’s testimony quell the furor over the Iran- contras scandal or add much to the committee’s knowledge of how the diversion came into being.

“I still don’t know the whole facts,” said Sen. Patrick J. Leahy (D-Vt.), vice chairman of the committee. “I don’t know what monies were diverted, how much, to whom it went. I don’t know who came up with this cockamamie idea in the first place, who issued orders for North, how many people helped him, and who was the blithering idiot who thought this would help the security of the United States.”

Even while Regan was testifying, Senate leaders were making plans for a more thorough investigation beginning after the 100th Congress convenes Jan. 6. They announced that Sen. Daniel K. Inouye (D-Hawaii) will chair a new Watergate-style select committee that will look more thoroughly into the scandal.

A majority of the select committee members, Democrats as well as Republicans, are conservatives who frequently support the President’s policies.

Regan agreed to testify Tuesday even though presidential aides normally are exempt from appearing before congressional committees under the separation-of-powers provision in the Constitution. During his appearance, he contended that as chief of staff he had no direct authority over those officials on the National Security Council staff who are believed to have carried out the diversion scheme.

To support his contention, he distributed copies of the White House organization chart to members of the committee and quoted from a Dec. 4, 1985, news conference in which the President said that his then-national security adviser, Vice Adm. John M. Poindexter, would report directly to him. Poindexter and his former deputy North have been identified as the key figures in the controversy.

“I had no idea the funds were diverted,” Regan told reporters after the hearing. “I have no knowledge of that subject at all. . . . The National Security Council does not report to the chief of staff. It never has before.”

However, Administration sources have said that when Poindexter was appointed national security adviser, Regan insisted that Poindexter either brief him in advance before reporting to the President or that he sit in on Oval Office sessions with Poindexter.

Asked if he is guilty of any wrongdoing, he replied: “No. Absolutely nothing. I’ve done absolutely nothing wrong.”

No Private Meetings

At the same time, according to committee Chairman Durenberger, Regan insisted there was no way that the President could have approved the diversion of funds without his knowledge. Durenberger said Regan asserted that neither Poindexter nor North ever had an opportunity to be alone with the President over the past two years.

“I can tell you that neither Col. North nor anyone else was ever authorized to divert funds from the proceeds of the sales of arms to the Iranians to the contras or anyone else,” Regan said.

According to Durenberger, Regan also told the committee that he and Reagan both learned of the diversion of funds Nov. 24, when they were informed by Atty. Gen. Edwin Meese III. Durenberger said Regan told senators that the President was “shocked and surprised by the news.”

Sen. William S. Cohen (R-Me.), a member of the intelligence panel who also was chosen to serve on the new select committee, said Regan contradicted the testimony of former National Security Adviser Robert C. McFarlane, who has said the President approved Israeli shipments of U.S. arms to Iran in 1985. A presidential document explicitly approving the shipments was not signed until last Jan. 17.

“The conflict became clearer,” Cohen said. “There’s a basic disagreement, in terms of when the President initially approved the sale of Israeli arms to the Iranians, in terms of what McFarlane has testified to.”

Although the committee has received no evidence to contradict Regan’s claim that neither he nor Reagan knew of the diversion of funds, many members said the chief of staff was at least guilty of failing to control what other White House aides were doing in the President’s name.

Compared to Bank

Referring to Regan’s recent assertion that he was like the bank president who is unaware of the activities of a teller, Cohen said: “I don’t think the White House ought to be equated with the First National Bank of Boston. The national security adviser is not a teller, but a trustee.”

Sen. David L. Boren (D-Okla.), who will head the Intelligence Committee next year as well as serving on the select panel, said Regan should resign as chief of staff because he allowed the President to sell arms to Iran against the best advice of his top Cabinet officers and the Joint Chiefs of Staff.

“Even if Mr. Regan were to convince me that he had no participation in this particular decision on diversion of funds, I still remain convinced that he has not served the President well, because he has not pushed to have the principal advisers to the President brought into the discussion,” Boren said.

‘Time . . . to Move On’

He added: “That is the No. 1 job of the chief of staff--to make sure that the President gets good and broad advice. Mr. Regan has failed in that responsibility to the President, and I think it is time for him to move on.”

As he has in the past, Regan rejected the suggestion that he resign and told reporters: “The President wants me to stay. So if the President wants me to stay, why not?”

Unlike DeConcini, however, Boren said he had no reason to disbelieve Regan’s testimony, and many senators praised the chief of staff for his openness before the committee. They reported that Regan, using virtually no notes except copies of his daily schedules during the period in question, was able to reconstruct many meetings and conversations in which the matter was discussed.

Even DeConcini acknowledged that Regan had turned in a good performance in responding to the committee’s questions. “He deserves an ‘A’ or a ‘10’ for his demeanor,” the Arizona senator said.

Believes Contrivance Failed

But Durenberger said he had concluded from Regan’s testimony that the controversy could have been avoided if the White House and the President had been willing to notify Congress of the Iranian arms shipments in advance.

“This particular event is a deliberate effort on the part of a handful of people, including the President of the United States, to avoid--deliberately avoid--congressional oversight,” he said. “The contrivance failed. Now the President is being held to account for it.”

Also testifying Tuesday were Shultz, who previously has told his story in open session of the House Foreign Affairs Committee, and NSC aide Howard Teicher.

Defense Secretary Caspar W. Weinberger and Meese are scheduled to appear before the committee today.

Select Committee Members

Members of the select committee were announced by Senate Democratic leader Robert C. Byrd (D-W.Va.), who chose the six Democratic members, and Senate Republican leader Bob Dole (R-Kan.), who chose five Republicans. Democrats will control the committee, as they will the Senate beginning Jan. 6.

In addition to Inouye, Boren and Cohen, the members will be Sens. Howell Heflin (D-Ala.), Paul S. Sarbanes (D-Md.), Sam Nunn (D-Ga.), George J. Mitchell (D-Me.), Warren B. Rudman (R-N.H.), James A. McClure (R-Ida.), Orrin G. Hatch (R-Utah) and Paul S. Trible Jr. (R-Va.).

Many of the select committee members are lawyers and former prosecutors or judges. Cohen and Sarbanes are the most liberal members; Hatch and McClure are expected to be the most supportive of the President.